Debate: Should food prices be determined by the free market?

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Should food prices be determined by the free market?

Background and context

At present, 37 countries throughout every region of the world are experiencing localized food insecurity, lack of access to food, or shortfalls in food production or supplies. In the past year, global food prices have increased an average of 43 percent, according to the International Monetary Fund (IMF). On April 14, the World Bank estimated that the doubling of food prices during the past three years could potentially push 100 million people throughout the world into extreme poverty.USAID: Global Food Crisis

Among reasons behind the increase in food prices, the recent surge in demand for biofuels, turning food crops into fuel crops, is a commonly touted culprit. Third world countries have suffered the hardest, for example the price of cooking oil (made from palm oil) sky-rocketed in Indonesia after most of the palm oil is used to meet demands of palm-oil derived biodiesel for powering motor vehicles and industries. The recent cyclone Nargis in Myanmmar (2008) devastated 48km of rice crops along the Irrawady delta resulting into a sudden increase in rice prices. Rice is a staple food in many countries and the consequent price rise caused many unable to afford rice.

Although the food price hikes hit poorer areas hardest, developed countries also suffer significantly from the crisis. A May 2008 national survey found that food banks and pantries across the U.S. were being forced to cut back on food distribution as 99 percent of respondents reported an increase in the number of people requesting services. Food crisis in developed countries

Governments all over the world are under intense pressure to properly react to the global food crisis. Some have argued for a ceiling price and subsidies to local farmers be introduced to curtail this problem. Others argue against direct interference with the free market, because it stifles trade in the long run and gives unfair advantage to local enterprises and removes the fair playing field that is otherwise protected by the free market.